Dutch Regulator Exposes Vulnerabilities of ‘Big Brother’ MiFID Surveillance

We all knew this is inevitable, but had no idea how high profile the victim could be. Bloomberg and the Financial Times are reporting that some trades of high profile hedge funds, including George Soros’ short positions on Dutch banks, have been exposed due to a human error.

The question here is not why this data has been published, but rather, how can we trust humans with extensive information on financial markets positions? If certain individuals at the Dutch financial regulator have access to such data, they could easily disseminate it to interested third parties.

The vulnerabilities of the system have been highlighted long ago, as the first generation of MiFID regulations was kicking in. Now that the inevitable has happened and we know that this data can be willingly or unwillingly leaked, how is the financial industry going to function democratically?

MiFID II MiFID II MiFID II stands for the Markets in Financial Instruments Directive, and is the second iteration of a sweeping directive. As such it is known as MiFID II. The original Markets in Financial Instruments Directive (MiFID) became effective in November 2007. It was intended as the foundation of the EU’s Financial Services Action Plan, a comprehensive project to create a single European market in financial services. MiFID is intended to create a level playing field for firms to compete in the EU’s fina MiFID II stands for the Markets in Financial Instruments Directive, and is the second iteration of a sweeping directive. As such it is known as MiFID II. The original Markets in Financial Instruments Directive (MiFID) became effective in November 2007. It was intended as the foundation of the EU’s Financial Services Action Plan, a comprehensive project to create a single European market in financial services. MiFID is intended to create a level playing field for firms to compete in the EU’s fina Read this Term and Additional Data Reporting

After the enactment of the MiFID II regulatory framework in January 2018, the potential conflicts arising from leaked data will include many more sensitive details about clients and companies. The data collected by companies in the industry needs to be kept for a protracted period of time, which exposes it to certain risks.

With orders, price discovery, Execution Execution Execution is the process during which a client submits an order to the brokerage, which consequently executes it resulting in an open position in a given asset. The execution of the order occurs only when it is filled. There is typically a time delay between the placement of the order and the execution which is called latency.In the retail FX space, reliable brokers always strive to deliver best execution to their clients in order to maintain a solid business relationship with them. This is a co Execution is the process during which a client submits an order to the brokerage, which consequently executes it resulting in an open position in a given asset. The execution of the order occurs only when it is filled. There is typically a time delay between the placement of the order and the execution which is called latency.In the retail FX space, reliable brokers always strive to deliver best execution to their clients in order to maintain a solid business relationship with them. This is a co Read this Term and transaction data reporting all being under surveillance and subjected to record keeping, the Orwellian ‘Big Brother’ scenario is becoming a fact of life in the EU.

Data vaults are supposed to be safe, but if even national regulators can’t keep their existing data safe from human mistakes, what could the consequences be for the fairness of the financial markets in the aftermath of the introduction of the MiFID II regulatory framework?

Soros Positions Dating to 2012

The short positions of George Soros that have been accidentally publicized amounted to “between 0.2 percent and 0.5 percent,” of outstanding shares in the companies in question. The official minimum threshold for the publication of such positions is 0.5 percent.

According to the Financial Times, the bets were against various Dutch banks, including ING Groep.

Lately the calls made by the billionaire investor have been under more than the usual scrutiny by the investment community and the media. Soros is said to have lost over $1 billion as reported by the Wall Street Journal, betting on a stock market decline in the aftermath of the election of Donald J. Trump as President of the United States.

The Failed Davos Call

Investors have been closely scrutinizing the opinions of George Soros for years, however that time might be coming to an end. Last week in Davos, the billionaire investor publicly voiced his concerns about an incoming stock market crash.

By the looks of it, Soros is wrong again, as the Dow Jones Industrial Average has rallied strongly this week eclipsing 20,000 for the first time ever. The US stock market is boosted by the initial executive actions of the new President of the United States, Donald J. Trump.

The hedge fund that Soros runs using his family’s assets currently amounts to about $30 billion. In the aftermath of the U.S. election loss, the WSJ reported that the fund may be looking for a new Chief Investment Officer.